China Pushing to Control US Rail Industry

Trains remain idle at the Trenton Transit Center due to water on the tracks from Hurricane Irene on Aug. 29, 2011 in Trenton, New Jersey. (William Thomas Cain/Getty Images)

June 11, 2018By Joshua Philipp

The Chinese Communist Party (CCP) is taking steps to control the U.S. rail industry, leveraging state funding to undercut competitors, force private companies out of business, and then dominate the market.

The issue doesn’t end with the debate about the free market or foreign actions that disrupt private competition in business. Control of the U.S. rail system also gives the CCP a network of sensors across the United States, and control of a key tool used for domestic transport by the U.S. military.

According to Erik Olson, vice president of the Rail Security Alliance, the main company behind this push is CRRC, a state-owned Chinese company. A report from Oxford Economics, backed by the Rail Security Alliance, found that CRRC’s actions could eliminate 65,000 jobs from the United States if China takes over U.S. freight rail production. If allowed to proceed, it could also reduce the U.S. GDP by close to $6.5 billion.

“We feel they’re very transparent in their interests in rail. It’s obviously part of their 2025 Plan,” Olson said, referring to the Chinese regime’s “Made in China 2025” plan to become a manufacturing superpower by replacing foreign competitors in global high-tech markets.

As part of its 2025 Plan, the CCP has identified 10 technology sectors to overtake which includes, among others, advanced rail equipment. To achieve this goal, the Chinese regime is directing state-owned and private firms to invest in and acquire foreign companies, and to acquire or steal technological innovations.

With CRRC, it is quickly advancing to dominate the global rail industry.

In Australia, the CCP has already demonstrated its tactics. According to Olson, CRRC went to Australia nine years ago. Since the Chinese state-owned company didn’t need to make a profit, it was able to make bids that no competitors could match. Of the three primary Australian rail companies, CRRC eventually acquired one, and the two others went out of business.

“We don’t want to see that here in the United States because we have a healthy, vibrant freight industry,” Olson said.

Already, however, CRRC is making inroads in the United States; it has won bids in Boston, Philadelphia, Los Angeles, and Chicago.

“The Boston one is particularly interesting because the second-lowest bid was from Bombardier, which was around a billion dollars, and CRRC came in at 569 million,” Olson said.

“It’s almost half the bid from Bombardier,” he said. “They don’t have to make money, so they can do whatever they want.”

As part of the agreement in Boston, Massachusetts will get a facility and jobs, but parts for the rail projects will be shipped from China. Boston also waived federal funds, so it won’t need to follow provisions under President Donald Trump’s 2017 “Buy American and Hire American” executive order.

Olson noted the first train cars going to Boston under the deal were shrink wrapped and shipped whole from China.

“This is what they’ve done. They’ve also built a new freight car company called Vertex in North Carolina, and this facility is with a U.S. partner,” he said. Olson noted that Vertex gets funding from China, and “Their stated goal is to bring in freight cars.”

“We saw all this happening and got concerned because we don’t want to see America be like in Australia and other countries where CRRC dominates,” he said. “If CRRC took over and decimated our U.S. rail base, they could charge whatever they want because they’d be the sole provider.”

Spying and Security Threats

In addition to the CCP’s growing influence over the business side of railways, there are also issues that could affect U.S. national security.

Today’s trains are fitted with closed circuit cameras, have internal WiFi, and, according to Olson, the technologies in the Chinese-made rail cars are from some of the same companies currently being accused of spying for the CCP.

User data could be at risk from the Chinese companies having access to internet traffic on the networks, and data collected by the sensors could feed back to the Chinese regime as well.

According to Olson, however, the bigger security threat is to the U.S. military, which still relies heavily on the U.S. rail system for transport. Trains run through every major city and through every major military base, he said, and trains are also used to transfer sensitive materials for the U.S. military.

If a war were to break out, the Department of Defense has about 200 freight cars of its own, but would still heavily rely on the public systems. Olson said if all these trains were built and managed by the CCP, “could you trust them?”

“We’re worried about if the Chinese controlled that whole system,” he said.

But the advocacy work of the Rail Security Alliance has identified many U.S. leaders in the Department of Defense and Department of Homeland Security who understand the threat.

Outside of the defense community, however, the Rail Security Alliance is still fighting an uphill battle to inform U.S. leaders. Yet, they have seen quite a bit of progress recently.

“We’ve seen in the last six months, I think, people turn to our side,” he said.

An issue is that when people think of trains, they still think of freight rails. Olson said today’s trains are “highly capable, technical vehicles” often fitted with more than 200 sensors on parts including wheels, open vents, temperature control, and others.

The threats also tie into the CCP’s interests in critical infrastructure—technologies and services necessary to keep a country working, such as transportation, financial systems, power grids, and others. For the CCP, it is looking to build technologies and products for critical infrastructure; and also makes the disruption of critical infrastructure a key goal in wartime planning.

The CCP also uses infrastructure programs as a pseudo-economic Trojan horse into foreign countries. In countries throughout Africa, Latin America, and Asia, the CCP will often build infrastructure while keeping the jobs and management under its own control.

“That’s how they’re breaking into the critical infrastructure space,” Olson said. “They have money to spend.”